Is an original painted portrait subject to Texas sales tax, and if so, who -- the out-of-state company arranging the commission or the artist -- must collect it?

Plain-English summary

A North Carolina corporation was in the business of commissioning original painted portraits for individual customers, using an independent agent in Texas to connect artists with purchasers and handling the contracts between them. The corporation asked whether these portraits were a professional service exempt from Texas sales tax, and if not, who was responsible for collecting the tax.

The Comptroller ruled that original portraits are taxable tangible personal property in Texas -- not an exempt professional service. That resolved the first question directly.

The second question -- who must collect the tax -- turned on the specific business relationships involved. If the North Carolina corporation qualified as a "broker" under Rule 3.352, the artist was "engaged in business in Texas" under Rule 3.286, and the sale wasn't an "occasional sale" under Rule 3.316, then the artist bore the collection duty. If instead the corporation qualified as a "factor" under Rule 3.352, the corporation itself was responsible for collecting the tax. And if the artist had no Texas business presence while the corporation was only a broker, the responsibility shifted entirely to the Texas customer, who would owe use tax directly to the Comptroller's office.

The correspondence's own subject line was "Paintings/Artwork — Sale Of Tpp," which the stub inherited as its title; that description is broadly accurate (the letter does conclude portraits are taxable TPP), but it omits the letter's real focus, which is the multi-party collection-responsibility analysis between the out-of-state corporation, the artist, and the Texas purchaser. The subject_title above has been updated to better reflect that emphasis.

What this means for you

Artists and out-of-state commissioning businesses

If you sell original artwork to Texas customers through an intermediary, don't assume the artwork itself escapes sales tax as a "service." Texas treats a finished painting as tangible personal property. Whether you (the artist) or the intermediary must collect tax depends on which one of you is legally a "broker" versus a "factor" under Rule 3.352, and whether the artist is separately "engaged in business in Texas" under Rule 3.286.

Texas purchasers of commissioned artwork

If neither the seller nor the arranging company collects Texas sales tax on your purchase (for example, because the artist has no Texas nexus and the arranger is only a broker, not a factor), you are personally responsible for remitting use tax on the purchase directly to the Comptroller.

Accountants and tax professionals

This letter is a useful illustration of the broker-vs-factor distinction in Rule 3.352: a "broker" arranges the sale on behalf of others without taking title, while a "factor" (who takes on more direct responsibility for the transaction) becomes the party responsible for tax collection. Confirming which role the intermediary plays -- along with the artist's nexus status and whether the transaction is an "occasional sale" under Rule 3.316 -- is necessary before advising a client on collection duties.

Common questions

Q: Is a custom-painted portrait exempt from Texas sales tax as a professional service?
A: No. The Comptroller ruled that portraits are subject to Texas sales or use tax as tangible personal property, not exempt as a professional service.

Q: Who has to collect the tax -- the company that arranges the commission or the artist?
A: It depends. If the arranging corporation is a "broker" (Rule 3.352), the artist is engaged in business in Texas (Rule 3.286), and the sale isn't an occasional sale (Rule 3.316), the artist collects. If the corporation is instead a "factor" (Rule 3.352), the corporation collects.

Q: What happens if the artist has no connection to Texas and the corporation is only a broker?
A: Then neither the artist nor the corporation is on the hook for collection, and the Texas customer must remit use tax on the portrait directly to the Comptroller's office.

Q: Does it matter whether the artist lives in Texas or another state?
A: Yes -- the letter specifically frames the artist's collection duty around whether the artist is "engaged in business in Texas" under Rule 3.286, which is a nexus-based test rather than one based purely on residency.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code § 3.352(a)(1) (definition of "broker" and "factor")
• 34 Tex. Admin. Code § 3.286(a)(1) (Seller's and Purchaser's Responsibilities -- engaged in business in Texas)
• 34 Tex. Admin. Code § 3.316(b)(1) (Occasional Sales)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9205L1171G02

Original ruling text

May 18, 1992

Dear ***:

Thank you for your letter of May 5, 1992, concerning the taxability of original
portraits. As I understand it, a North Carolina corporation is engaged in the
business of commissioning original painted portraits for individual customers.
The corporation has an independent agent in Texas that contacts both the artist
and the purchaser. The corporation handles all contracts entered between the
artist and the purchaser. The finished portrait may be delivered by either the
artist or by common carrier. Your questions, with response, are restated below.

(1) Is the creation of an original portrait a professional service and not
subject to sales tax in Texas?

Response: Portraits are subject to Texas sales or use tax.

(2) If the creation of an original portrait is subject to sales tax, where does
the responsibility lie for collecting the tax, i.e. the North Carolina
corporation or the artist and does it matter whether the artist is a resident
of Texas or resides in another state?

Response: If the following three conditions are met, the artist would be
responsible for collecting Texas tax:

(A) The North Carolina corporation meets the definition of a broker as defined
in Section (a)(1) of Rule 3.352, Brokers and Factors,

(B) The artist is engaged in business in Texas as defined in Section (a)(1) of
Rule 3.286, Seller's and Purchaser's Responsibilities,

(C) The sale is not an occasional sale as defined in Section (b)(l) of Rule
3.316, Occasional Sales.

If the North Carolina corporation meets the definition of a factor as defined
in Section (a)(3) of Rule 3.352, the corporation is responsible for the
collection of the tax. If the artist is not engaged in business in Texas and
the corporation is a broker, then the Texas customer is responsible for
remitting the use tax on the portrait directly to this office.

This opinion is based on the facts presented. If there are any additional or
different facts, the opinion may change. If you have any questions or need
additional information, you may call toll free 1-800-252-5555 Ext. 50037 or the
regular Austin number is 512-475-0037. You may also write to Tax Administration
Division.

Sincerely,

Lindey Osborne
Tax Administration Division